Is Zero Premium Life Insurance For Real?

There’s been a lot of buzz among life insurance agents about a product called zero premium life insurance. An Insurance Agent Site Posted a Warning here: Zero Premium LIfe Insurance Really? On the surface the product sounds great. It ill be marketed to senior citizens as a final expense life insurance product, and they won’t have to pay for it! Investors will pay the entire premium, and in return, the investors will be entitled to a share of the death benefit.

This may seem fair. The senior citizen will still have a $15,000 death benefit, which should be enough for funeral and other final expenses. The investors will collect the rest of a $50,000 policy. However, this product would seem to violate some basic principles of legal life insurance, namely a concept we have called insurable interest.

Insurable interest, means that a beneficiary must have a stake in the life of the insured. It makes logical sense to name a close family member or business associate as a beneficiary because they will have something to lose if the insured person dies. A close family member may have to pay for a funeral or lose a source of income. A business associate may lose a partner, or have to give up a portion of the business to the deceased person’s family if they don’t have money to buy them out.

Anyway, strangers do not have an insurable interest, and so they cannot usually be named as beneficiaries. This is because it is illegal to use life insurance to gamble on somebody’s life span, and especially because, we do not want to give somebody an interest in a person’s death (i.e. murder?).

The next problem, is that investors will look for life insurance products that seem to have a low price. This cannot be good for life insurance companies either.

It doesn’t seem as if the zero premium life insurance product has been approved in any one of the 50 US states yet, though many insurance agents believe that it will be soon. I do not see how it can pass this test, but it would be worth taking notice of any stories in the news. And if it does get approved, and you are approached about this product, you may have some questions to ask. I hope this article has made you a more informed consumer and voter.

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Life Insurance

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Life Insurance, senior life, zero premium life

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